The Bottom Line

February 23, 2016
Lessons From a Coming Recession

Judd Gregg, a former Republican senator from New Hampshire, served as chairman of the Senate Budget Committee from 2005 to 2007 and ranking member from 2007 to 2011. He recently wrote an op-ed featured in The Hill. It is reposted here.

February 23, 2016

Senator Ted Cruz (R-TX) has released a comprehensive plan to increase defense spending. We've calculated the cost of the campaign's statements as a part of our Fiscal FactCheck project and found that these defense increases would cost $2.4 trillion over the next ten years.

Read the full explainer on our Fiscal FactCheck website.


February 23, 2016
Transforming Federal Financial Reporting and Auditing

David M. Walker, former Comptroller General of the United States from 1998 to 2008 and a member of the Committee for a Responsible Federal Budget, wrote a commentary that appeared in Government Executive. It is reposted here.

February 17, 2016

The President’s Budget relies on assumptions from the Office of Management and Budget (OMB), but we estimate that when it is estimated by the Congressional Budget Office (CBO), debt would be slightly lower but on a more upward path.

CBO typically weighs in on the budget using their own budget projections and estimates of the President's policies. Sometimes these estimates vary wildly if the budget uses a lot of magic asterisks or very favorable economic assumptions, but CBO and OMB have generally been close in recent years. We predict that they will be similarly close this year.

To construct the estimate, we used CBO's January budget projections and OMB's estimates of the cost of all the budget's policies, only adjusting the policy estimates for the different baselines CBO and OMB use to calculate the sequester. OMB's estimate of the President's budget shows debt jumping from 74 percent of GDP in 2015 to 76.5 percent in 2016 before falling slightly to 75 percent and stabilizing at that level in the last few years.

Our estimate of what CBO would say shows debt jumping to only 75.6 percent in 2016, then falling to a low of 73.7 percent in 2021 before rising slightly to 74.5 percent by 2026. These different paths reflect the difference in CBO's and OMB's baselines: OMB projects higher debt in the near term but CBO projects a less favorable path of debt in later years.

February 13, 2016

Republican presidential candidate Donald Trump has put forward five major sets of initiatives on his campaign’s website. As part of our FiscalFactCheck project, we've done a very rough estimate of what these proposals would cost.

See the full analysis on our Fiscal FactCheck page

February 12, 2016

With the release of the President's FY 2017 budget, it is common for reporters and observers to say that the budget is dead on arrival on Capitol Hill or ultimately won't matter. The sentiment is understandable considering that Republicans control Congress, and there is little prospect for major legislation this year, but it misses the mark a bit. There are a few different ways that the President's budget can still be relevant even if they are less high-profile than Congress agreeing to pass major parts of the President's agenda.

For one, President's budgets are relevant each fiscal year in appropriations negotiations. Especially in recent years, when the government has been funded in one fell swoop in omnibus bills, the budget serves as a starting point for appropriators who have to consider many issues at the same time and can fall back on budgets that agencies across the government have developed over many months. This will definitely be the case this year, since the budget does not change the spending caps that will be in effect for FY 2017, so appropriators will likely be working off the same overall funding levels the President used.

But even mandatory spending and tax policy changes can be adopted under circumstances that would not seem politically favorable to them. For example, many policies proposed by former President George W. Bush in his final budget (FY 2009) were adopted by lawmakers even though they were for the most part enacted during the Democratic-controlled 111th Congress. Specifically, they used many of President Bush's health care savings policies to offset the cost of the Affordable Care Act. And among policies that have not been enacted, there are still others that continue to show up in President Obama's current budget.

The list below shows policies in President Bush's FY 2009 budget that were subsequently enacted or proposed by President Obama in the FY 2017 budget (this includes partial policies or ones that are very similar in concept). Both the legislation they were included in and the budgetary effect originally estimated in the FY 2009 budget (where available) are in parentheses. Note that this does not include extensions of temporary policies, which would include things like the 2001/2003 tax cuts and several tax extenders.

February 12, 2016

In an appearance on C-SPAN this morning, CRFB president Maya MacGuineas referenced a Congressional Budget Office (CBO) analysis that shows that high earners do not pay a particularly high percent of their income in taxes but do pay a large share of taxes.

February 10, 2016

The final budget of the Obama Presidency continues a mix of long-standing policies (including a few that have been in all eight budgets) and policies that are finding their way into the budget for the first time. With regards to new policies, some were previewed during the State of the Union address last month, while others have been laid out in the weeks since then. Here's a rundown of some of the major new proposals in the President's budget.

Business Tax Reform

In his past three budgets, President Obama had proposed a revenue-neutral reserve fund for business tax reform, which included several corporate tax changes amounting to a net tax increase that would offset a reduction in the corporate tax rate to 28 percent. This year, the President has largely maintained the policies that were included in the reserve fund but is now dedicating the $549 billion of revenue to deficit reduction to pay for the business tax cuts in last year's tax deal.

Clean Transportation Investments

The President's budget includes several proposals to tackle climate change, the most ambitious being a $312 billion over ten years clean transportation investment plan. The proposal includes $200 billion for transportation projects including subways, buses, rail, and the TIGER grant program (part of this funding reflects a previous budget proposal to increase surface transportation spending by $116 billion). Another $100 billion would go to state and local governments for clean infrastructure projects. Finally, $20 billion would go to clean transportation research for things like self-driving cars, electric vehicle charging stations, and clean energy airplanes. These policies would be paid for with another new policy in the President's budget: a $10.25 per barrel oil tax. This tax comes on top of a pre-existing policy to reinstate Superfund taxes, which include a 9.7 cent per barrel oil tax.

Medicare Advantage Competitive Bidding

February 10, 2016

President Obama released his final budget proposal yesterday, and we released a short paper that analyzes its major policy proposals. This budget would stabilize the debt and use increased tax revenue to pay for new proposals, retroactively pay for December's costly tax extenders package, and deficit reduction. As we explain:

The President's budget should be commended for not only responsibly paying for new initiatives, but identifying significant deficit reduction to stabilize the debt.  Preventing the debt from growing faster than the economy is an important first step to achieving sustainable fiscal policy.

Unfortunately, the President's budget does not go far enough in terms of actually reducing the debt from its current record-high levels, nor does it sufficiently address the long-term growth of entitlement spending, particularly Social Security.

As CRFB President Maya MacGuineas noted in a statement, "This budget is neither fiscally aspirational nor irresponsible."

Read the full paper here

February 9, 2016

Moments ago, President Obama released the final budget of his presidency. In the coming hours, days, and weeks, CRFB will be publishing analysis of the Fiscal Year (FY) 2017 budget. Below, we start with five quick takeaways. Based on our first look, the President's budget includes:

1. A Stable Debt, But at Record High Levels

Under the President's budget, debt held by the public will grow from almost $13.7 trillion today to $21.3 trillion by the end of 2026. Yet as a share of the economy – the measure generally preferred by economists – debt under the President's budget is projected to remain relatively stable at about 75 percent of Gross Domestic Product (GDP). Stabilizing the debt is an important first step to putting it on a sustainable path and is certainly an improvement over current law, under which (according to the Office of Management and Budget's adjusted baseline) debt will rise to just under 88 percent of GDP. Yet even under the President's budget, debt would remain the highest it has been in American history other than around World War II at nearly twice the historic average over the past 50 years.

February 9, 2016
Candidates need credible solutions to fix the debt

Robert L. Bixby, executive director of the Concord Coalition, and Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt, wrote a commentary that appeared in Fosters, a southern New Hampshire publication, on the day of the New Hampshire primary. It is reposted here.

February 8, 2016

With the Congressional Budget Office releasing its final baseline last week, we know the dire fiscal future facing the country. Thanks to policymakers' disregard for fiscal discipline, the baseline is much worse than it had been in August. Of particular concern is the rapidly increasing interest costs in the baseline.  Interest is the fastest growing type of spending over the next 10 years.

The $223 billion in interest costs during fiscal year (FY) 2015 resulted from servicing the $13.1 trillion debt at an average interest rate of 1.7 percent. Even at record-low interest rates, this is already more than we spend on the Departments of Homeland Security and Veterans Affairs combined. This is also more than current spending on the Departments of Education, Housing and Urban Development, and Transportation combined. Every dollar the United States devotes to interest payments is a dollar that either cannot fund national priorities or that must be collected through higher taxes. As interest rates rise back to more normal levels and debt continues to grow, the Congressional Budget Office (CBO) expects spending on debt service to increase significantly.

February 8, 2016

The President has released a preview of the spending priorities in his FY17 budget, most of which are new although some were proposed in previous years. We collected a list of all the items in the preview, as well as other materials that the President released last week. Stay tuned to our blog for updates on the President’s Budget once it’s released tomorrow at 11 a.m.  

February 4, 2016

Democratic presidential candidate and former Secretary of State Hillary Clinton has proposed several new taxes that would raise taxes on the wealthy by between $400 billion and $500 billion to pay for new investments helping the middle-class.

February 3, 2016

Update: Since this analysis, the Sanders campaign has added additional offsets to their website that will reduce the plan’s gap between new spending and new revenues, most significantly the taxation of capital gains at death. In the coming days, we will be updating our analysis to reflect the new additions.


February 2, 2016

CBO's summary of its budget outlook included a short summary of the long-term debt outlook, which showed debt rising continuously and eventually exceeding the size of the economy. With the full budget report being released earlier this week, CBO has put out a little more detail on what the budget will look like over the next 30 years. Not surprisingly, it shows debt rising significantly in the coming decades with Social Security and particularly health care spending being the main drivers. The fuller detail in the report also allows us to estimate what happens if policymakers don't adhere to fiscal responsibility. The answer: debt goes even higher, reaching 185 percent of GDP in 2050 instead of 150 percent.

CBO's report shows debt reaching 116 percent of GDP by 2036 and 155 percent by 2046, including the negative effects of debt and higher marginal tax rates on the economy. Excluding the economic effects, we estimate that debt would reach 150 percent of GDP by 2050. However, CBO's baseline includes some policy assumptions that may not actually hold up, such as policymakers keeping the sequester in place and allowing temporary tax provisions that have routinely been extended to expire.

Bridge from CBO Baseline to Alternative Budget Outlook
  2026 Debt Effect (Dollars)
2026 Debt Effect (Percent of GDP)
CBO Baseline Debt $23.8 trillion 86.1%
Repeal Sequester $897 billion 3.2%
Repeal Health Care Taxes $256 billion 0.9%
Extend Bonus Depreciation at 30% $149 billion 0.5%
Extend Other Temporary Tax Provisions $178 billion 0.6%
Interest $233 billion 0.8%
Total Changes $1.7 trillion 6.2%
Alternative Budget Outlook Debt $25.5 trillion 92.3%

Source: CBO, CRFB calculations

February 2, 2016
Estimates Vary Between Experts and the Campaign

Democratic presidential candidate Sen. Bernie Sanders (I-VT) recently released arguably his most ambitious policy proposal yet, to move to a single-payer health care system in the U.S., but debate quickly arose over just how much such a far-reaching proposal would actually cost.

The Sanders campaign relies on an estimate from UMass-Amherst economist Gerald Friedman suggesting the plan would cost $13.8 trillion over ten years. But Emory University health economist Kenneth Thorpe contends that it could actually cost closer to $24.7 trillion, particularly without simultaneously enacting very large provider payment cuts – which are not mentioned anywhere in Sen. Sanders's plan.

The Plan

Sen. Sanders's single-payer proposal would cover every American under a single government-administered health insurance plan that would provide a comprehensive set of benefits, including things like mental health services and long-term care, with no cost-sharing. He also proposed several tax increases that his campaign claims would fully offset the cost of the plan.

Differing Cost Estimates

However, with many of the details left unspecified, including the exact services that would be covered and provider payment rates, different estimates have been produced that project widely different costs.

Friedman's estimate used by the campaign assumes that moving to single-payer would reduce national health spending by $10 trillion – or a full fifth – due to reduced administrative costs, reduced prices for pharmaceuticals and medical devices, and controls on administrative costs and drug prices (the estimate also assumes $3.7 trillion of added costs due to higher health utilization). It is unclear exactly how such dramatic savings would be achieved, and it would likely require tough choices that go far beyond simply adopting a single-payer plan, including significantly cutting provider payment rates closer to the much lower levels seen in some other nations with single-payer systems.

January 29, 2016

Senators James Lankford (R-OK) and Joe Manchin (D-WV) sent a letter Thursday to Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) pushing for sustained momentum on addressing improvements to the Social Security Disability Insurance (SSDI) program.

Despite the postponement of the SSDI trust fund’s exhaustion until 2022 by the payroll tax reallocation contained in the Bipartisan Budget Act (BBA) of 2015, more is needed to be done in order to achieve long-term program sustainability. Lankford and Manchin commended the BBA’s small SSDI reforms while urging the Finance Committee to continue working further on options that will improve the program’s solvency. Quoting the 2015 Social Security Trustees’ report, they note:

The 2015 Social Security Trustees report recommended “Any necessary resource reallocation that does occur should not be regarded as a substitute for action to sustain the finances of DI and Social Security as a whole, nor enacted in a manner that has the effect of further postponing those required corrections.” Although the Act temporarily extended the solvency of the SSDI program and included some small improvements to the program, it did little to improve the program’s long-term finances or to improve the structure of the SSDI program for beneficiaries and taxpayers. We hope you agree that more substantial reforms are needed.

January 29, 2016
In Charts!

We've published a new chartbook to illustrate the most important facts and figures from this week's report by the Congressional Budget Office (CBO), which shows debt and deficits are now projected to rise much higher than previously projected.

January 22, 2016

The deficit will grow from less than $550 billion in 2016 to $1.4 trillion in 2026, according to this week's report by the Congressional Budget Office (CBO), driven by a $2.5 trillion rise in spending that is only partially offset by a $1.7 trillion revenue increase. And according to CBO, nearly three-quarters of that spending increase comes from just three items – Social Security, Medicare, and interest on the debt.

CBO projects that Social Security spending will increase by about $700 billion over the next 10 years, while Medicare spending will increase by about $500 billion over the same period. These two programs account for 50 percent of the spending increase. Meanwhile, interest spending will rise nearly $600 billion over the decade – accounting for another quarter of the spending increase.

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